THE  REPORT  OF  THE  INDUSTRIAL 
COMMISSION. 


V.— TRUSTS. 


A PAPER  BY 

MAURICE  H.  ROBINSON. 


[From  the  Yale  Review , November,  1902.] 


THE  REPORT  OF  THE  INDUSTRIAL  COMMISSION. 

V. — Trusts. 

nr  HE  report  of  the  Industrial  Commission  relating  to  trusts 
is  of  very  large  public  interest,  both  from  the  political  and 
from  the  economic  standpoint.  It  has  to  a certain  extent  pre- 
vented the  trust  issue  from  becoming  a political  question,  decided 
in  the  political  arena,  with  all  the  evils  that  such  a method 
of  regulation  would  involve.  It  also  has  furnished  the  public, 
the  economist  and  the  statesman  with  a large  and  fairly  accurate 
mass  of  data,  relating  to  the  nature  and  the  workings  of  the 
so-called  trusts.  During  the  last  decade  there  has  been  much 
danger  that  the  trust  problem  would  become  a political  issue ; that 
the  parties  would  become  either  champions  or  defenders;  that 
legislation  relating  to  the  trusts  would  be  political  rather  than 
economic;  that  partisan  prejudice  rather  than  judgment  would 
be  used  in  the  solution  of  the  problem  that  the  growth  of  the 
trusts  has  raised.  It  is  not  too  much  to  say  that  the  report  of  the 
Industrial  Commission  has  been  the  largest  single  influence  in 
snatching  the  trust  problem  from  the  political  arena  and  laying 
the  basis  for  a permanent  solution  upon  economic  and  social 
grounds.  This  result  was  partly  due  to  the  importance  of 
the  issue,  partly  to  the  organization  of  the  Industrial  Com- 
mission itself.  All  interests  have  felt  that  a question  of  such 
vital  importance  must  be  settled  not  upon  political,  but  upon 
economic  principles.  The  organization  of  the  Commission, 
made  up  of  representatives  of  both  the  great  political  parties, 
together  with  representatives  of  the  leading  industries  and  organ- 
izations of  the  country,  made  it  almost  impossible  to  use  the 
report  of  the  Commission  for  partisan  purposes.  Still,  notwith- 
standing these  conditions,  there  may  be  discerned  at  intervals  a 
slight  tendency  to  justify  by  the  course  of  events  the  policies  of 
the  respective  political  parties.  This  tendency,  most  observable 
in  the  discussion  of  the  effect  of  the  protective  tariff  upon  the 
formation  and  operation  of  the  trusts,  is,  however,  so  vague  that 
it  may  be  almost  entirely  disregarded  in  judging  the  value  of  the 
work. 


[9°2] 


The  Industrial  Commission  ; 


Trusts. 


279 


The  importance  of  the  subject  for  which  the  Commission  was 
created,  to  “collate  information  and  to  consider  f*  re“  culture 
legislation  to  meet  the  problems  presented  by  labor,  agncu 
afd  capital,”  justified  the  time  and  expense  necessary  for  the 
preparation  of  such  a report.  The  manufacturing  mtere.ts  o^re 
United  States  are  of  vast  and  increasing  importance.  Accord 
ing  to  the  Twelfth  Census,  the  total  capital  invested  m man- 
ufacturing amounted  in  1900  to  almost  ten  thousand  millions 
dollars.  The  increase  in  invested  capital  from  1850  to  1900  w 
over  seventeen  fold.  The  value  of  products  turned  out  by  th 

manufacturing  industries  has  increased  W^^sCth 
about  one  hundred  million  to  a little  over  one  bill  on  dolla  s wo 
in  1 8 TO  and  over  thirteen  billions  in  1900.  This  increase  in 
capital  invested  and  the  value  of  products  in  manufacturing  may 
be  compared  with  the  value  of  farm  property  and  the ^va  ue  of 
farm  products.  The  value  of  farm  property,  according  to  the 
" s,  has  increased  from  about  four  billion  dollars 
TiSto  to  a little  over  twenty  billion  dollars  in  1900;  the 
value  of  farm  products  from  a little  less  than  two  billions  in  1870 
to  a little  less  than  five  billions  in  1900.  It  will  thus  be  seen  that 
while  the  value  of  the  product  in  manufacturing  h^  ^rease 
about  twelve  times,  that  of  agriculture  has  increased  only  three 
times  during  the  last  half  century.  During  this  same  period It 
increase  in  population  has  been  only  two  and  one-fourth  fold. 
The  capital  invested  in  transportation,  while  less  than  in  farm 
property  may  possibly  exceed  that  invested  m manufacturing 
The  total  capital  liabilities  of  the  railroads  of  the  country  was 
in  1900  almost  exactly  twelve  billion;  their  gross  earnings  fifteen 
hundred  million  dollars;  their  net  earnings  five  hundred  m, l ion 
dollars  Thus  considered  from  the  standpoint  of  capital  invested 
and  the  value  of  the  products,  making  due  allowance  or  the 
duplication  of  the  costs  of  production  in  passingromstageto 
stage  it  is  evident  that  the  manufacturing  interests  of  the  coun 
try  are  nearly  coordinate  in  importance  with  either  the  farming 
industry  or  that  of  transportation.  Added  to  this,  it  mus 
noted  that  the  manufacturing  industries  are  increasing  moie  P 
idly  than  the  others  and  likely  to  continue  their  progress  at 
somewhat  faster  rate  in  the  near  future. 


28o 


Yale  Review . 


[Nov. 


In  connection  with  this  rapid  growth  on  the  material  side, 
important  changes  are  being  effected  in  the  manufacturing  indus- 
tries from  the  standpoint  of  business  organization.  Formerly 
nearly  all  manufacturing  was  done  by  the  individual  entrepre- 
neur, later  by  the  partnership,  now  by  the  corporation;  of  the 
total  production  in  the  year  1900,  nearly  eight  thousand  millions 
in  dollars,  or  almost  60  per  cent,  of  the  total  output,  was  the  work 
of  the  corporation.  Out  of  over  five  hundred  thousand  inde- 
pendent establishments  in  the  United  States,  forty  thousand 
in  round  numbers  were  in  corporate  form.  The  corporations 
were  12  per  cent,  in  number  and  produced  59V10  per  cent,  of 
the  output.  The  partnerships  were  i89/10  per  cent,  of  the  total 
number  of  establishments,  producing  19V10  per  cent,  of  the 
total  production.  Individuals  owned  788/10  per  cent,  of  the 
number  of  establishments  and  produced  only  2O6/10  per  cent,  of 
the  total  amount  of  production.  In  certain  lines  the  progress  of 
the  corporation  has  been  particularly  rapid,  viz.,  in  the  manu- 
facture of  iron  and  steel,  agricultural  implements,  coke,  gas,  elec- 
trical apparatus,  manufactured  ice,  rubber  goods,  photographic 
goods,  etc.,  etc.  This  concentration  is  accomplished  through 
the  corporation,  and  to-day,  in  a word,  the  corporation  problem 
has  to  all  intents  and  purposes  superseded  the  trust  problem  of 
the  previous  decade. 

With  this  vast  increase  in  the  manufacturing  industries  of  the 
country  and  the  concentration  of  the  management  under  a com- 
paratively small  number  of  corporations,  the  public,  the  investors, 
the  economists  and  the  statesmen  have  become  vitally  interested 
in  their  management.  The  public  has  in  the  past  been  startled, 
statesmen  anxious,  economists  in  doubt.  Investigations  have 
been  pushed  by  interested  students  with  vigor  and  earnestness; 
interested  parties  have  been  active  in  the  defense  of  the  so-called 
trusts;  information  has  been  meagre  and  often  misleading; 
legislation  has  been  enacted  which  is  the  natural  outcome  of 
the  uncertainty  and  ignorance.  Even  the  managers  of  the  cor- 
porations themselves  have,  in  some  cases,  expressed  their  own 
doubts  as  to  the  future  of  the  corporations  which  they  have 
created.  Under  these  circumstances  there  are  certain  questions 
which  ought  to  be  answered.  These  questions  are : First,  to  what 


1902]  The  Industrial  Commission  ; Trusts . 281 

extent  are  the  manufacturing  interests  becoming  consolidated  in 
large  establishments,  usually  under  the  corporate  form  ? Second, 
what  are  the  causes  and  the  economic  conditions  to  which  this 
movement  may  be  attributed?  Third,  what  forms  of  organiza- 
tion have  been  adopted  by  the  consolidations,  the  reasons  for  the 
different  forms  in  the  different  countries,  the  economies  and  dan- 
gers of  each?  Fourth,  what  elements  of  monopolistic  power  do 
these  corporations  possess?  what  are  the  methods  by  which  they 
attain  their  monopoly?  are  these  monopolies  built  upon  govern- 
ment statutes,  as,  for  example,  patents,  tariffs,  franchises,  or 
upon  the  aid  of  other  interests,  such  as  railroad  discriminations, 
rebates,  the  factor  system,  local  cuts  in  prices;  that  is,  is  the 
monopoly  power  of  the  large  corporations  based  upon  internal 
power  or  external  favors  ? Fifth,  what  measure  of  public  regula- 
tion is  desirable  in  order  that  other  interests  may  be  safeguarded, 
that  neither  the  consumer  nor  the  wage  earner  shall  be  unjustly 
oppressed  by  the  huge  corporation  ? 

The  act  of  the  Congress  of  1898,  establishing  the  Industrial 
Commission,  gave  that  body  ample  power  and  provided  it 
with  the  means  and  equipment  necessary  to  accomplish  its  pur- 
pose. The  Commission  as  appointed  by  President  McKinley 
comprised  an  able  body  of  men,  all  of  whom  were  interested  in 
the  work  of  the  Commission ; they  employed  a competent  staff  of 
experts  in  the  several  lines  of  inquiry,  and  were  equipped  with 
facilities,  clerks  and  stenographers.  The  work  is  therefore  to  be 
judged  by  its  results  with  due  regard  for  the  magnitude  of  the 
problem.  What  light  has  it  thrown  upon  this  question  ? Has  it 
contributed  facts  that  justify  its  existence?  facts  that  are  suf- 
ficient to  furnish  the  basis  for  the  proper  solution  of  the  problem  ? 

The  report  of  the  Industrial  Commission  relating  to  trusts  com- 
prises four  volumes  directly  bearing  upon  this  subject;  volumes 
one  and  thirteen  upon  the  American  trusts;  volume  two  upon 
trust  and  corporation  laws;  volume  eighteen  upon  European 
trusts  and  the  laws  relating  to  their  regulation  and  control.  In 
addition  to  these  volumes  the  Commission  has  published  a large 
amount  of  matter  bearing  indirectly  upon  this  subject;  thus,  vol- 
umes seven  and  fourteen  furnish  information  in  regard  to  the 
relations  of  capitalistic  combination  to  labor;  volume  twelve,  to 


282 


Yale  Review. 


[Nov. 


the  great  mining  corporations;  volume  seven,  those  dealing  in 
agricultural  products,  like  milk  and  grain ; volumes  four  and  nine, 
relating  to  transportation,  furnish  information  in  regard  to  the 
discrimination  of  railways  as  they  affect  the  great  corporations; 
volume  eleven,  a report  on  the  taxation  of  corporations.  In 
addition  to  these  volumes,  the  final  report  comprises  a sum- 
mary and  the  report  of  the  experts  employed,  on  (1)  mining 
combinations,  (2)  railroad  combinations,  (3)  industrial  com- 
binations and  (4)  the  taxation  of  corporations.  It  also 
contains  an  appendix,  showing  the  volume  of  production  in 
various  lines,  price  statistics  for  various  commodities,  a list  of 
industrial  combinations  with  their  capitalization  and  dividends, 
and  the  amendment  to  the  anti-trust  act  of  1890  introduced  in  the 
Fifty-fifth  Congress  by  Mr.  Littlefield  of  Maine.  In  the  volumes 
relating  to  trusts,  in  addition  to  the  testimony,  there  are  found  two 
papers  of  exceptional  value,  both  by  Prof.  Jenks,  the  expert  of 
the  Commission,  the  one  relating  to  prices  of  commodities  dealt 
in  by  trusts  and,  second,  to  the  character  of  the  securities  of 
certain  railways  and  the  more  important  combinations.  The 
value  of  the  testimony  is  largely  enhanced  by  the  very  complete 
indices  prepared  and,  for  the  use  of  the  public  at  least,  by  the 
digests  and  reviews  prepared  by  the  experts  of  the  Commission. 
The  matter  relating  to  trusts  comprises  about  thirty-five  hun- 
dred pages,  of  which  about  one-half  is  testimony  and  the  remain- 
der reviews,  digests,  special  report,  indices,  lists  of  witnesses, 
etc.,  etc.  Over  one  hundred  witnesses  appeared  before  the  Com- 
mission and  testified  in  regard  to  over  fifty  of  the  larger  and 
more  important  combinations.  In  some  cases  the  value  of  the 
testimony  regarding  a certain  trust  was  lessened  by  the  fact  that 
only  one  witness  appeared,  usually  some  one  intimately  connected 
with  the  organization  of  the  corporation  in  question. 

Having  outlined  the  organization  of  the  Commission,  the 
nature  of  the  problem  before  it,  and  the  general  character  of  the 
report,  we  are  now  in  a position  to  inquire,  what  light  has  the 
investigation  thrown  upon  the  questions  involved  in  the  trust 
problem  ? 

I.  The  Extent  and  Rapidity  of  the  Consolidation 
Movement.  Upon  this  point  the  report  throws  little  light.  The 


1902] 


The  Industrial  Commission  : Trusts. 


28 


/ 


table  of  consolidations  which  appears  in  the  appendix  of  the  offi- 
cial report  is  contributed  by  the  Census,  not  by  the  Commission. 
In  the  final  report,  Prof.  Jenks  dismisses  the  subject  with  two 
pages  and  concludes  that  the  figures  “give  no  clue  as  to  the  extent 
to  which  such  combinations  are  able  to  monopolize  any  industry.” 
The  subject  is  one  of  great  difficulty;  no  individual  is  able  to 
solve  it  unaided.  The  government  alone  can  furnish  sufficient 
facts  upon  which  any  adequate  judgment  might  be  based.  The 
present  census  gives  a large  amount  of  such  data  and  draws  cer-' 
tain  conclusions  which  are  of  value.  A study  of  the  census 
data  would  enable  one  to  show  the  extent  to  which  corporations 
are  superseding  partnerships  and  individuals  in  the  management 
of  business,  and  to  what  extent  they  have,  up  to  the  present  time, 
succeeded  in  organizing  the  various  great  industries  under  a con-/ 
centrated  management.  This  question  is  yet  unsolved,  notwith- 
standing that  it  is  the  center  of  the  trust  question.  If  large  com- 
binations are  growing  no  faster  than  the  industries  in  which 
they  exist,  if  individual  enterprises  keep  pace  with  the  large  cor- 
poration, the  consolidations  will  not  be  able  to  attain  a monopo- 
listic position.  Legislation  ought  to  be  very  different  when  large 
corporations  are  working  side  by  side  and  merely  keeping  pace 
with  individual  enterprises  from  that  which  might  be  required 
under  a regime  in  which  all  industries  are  becoming  fast  con- 
solidated into  capitalistic  monopolies. 

II.  The  Causes  of  Consolidation.  Assuming  that  it  is 
proven  that  there  are  large  consolidations  growing  up  in  many 
branches  of  industry;  that,  temporarily  at  least,  the  great  con- 
solidations possess  powers  different  from  those  possessed  by  cor- 
porations twenty-five  years  ago;  they  are  able  to  disregard  to  a 
certain  extent  the  laws  of  competition, — the  inquiry  naturally 
arises  as  to  the  causes  at  work,  or  the  underlying  industrial  con- 
ditions which  are  producing  them.  Upon  this  point  the  report 
of  the  Commission  gives  considerable  testimony  of  value.  The 
men  who  are  inside  the  trusts,  who  were  with  independent  com- 
panies before  consolidation,  who  have  been  instrumental  in  bring- 
ing independent  companies  under  the  consolidation  form,  under- 
stand from  experience  the  causes  or  conditions  which  have 


284 


Yale  Review. 


[Nov. 


impelled  them  to  unite.  It  is  doubtless  true  that  these  witnesses, 
in  their  testimony,  have  not  always  told  the  whole  truth;  never- 
theless they  throw  a flood  of  light  upon  the  inside  history  of  the 
formation  of  the  great  combinations.  Taking  the  testimony  as 
a whole,  collating  facts  from  one  point  with  those  from  another, 
comparing  these  facts  with  each  other  and  with  the  testimony  of 
independent  interests,  a reasonably  accurate  diagnosis  of  the 
causes  can  be  made.  The  men  inside  the  great  corporations 
emphasize  the  impelling  power  of  competition  as  a cause.  They 
call  it  destructive  competition.  They  sometimes  do  not  under- 
stand that  the  presence  of  a large  fixed  capital,  useful  for  certain 
purposes  but  much  less  useful  for  any  other,  changes  radically 
the  nature  and  working  of  the  laws  of  competition.  The 
trained  economist,  however,  is  able  to  read  into  their  testimony 
the  underlying  conditions  which  they  often  fail  to  see.  On  the 
other  hand,  the  independent  operators^  emphasize  just  as  strongly 
the  power  of  discriminations,  of  favors  from  railways  to  large 
corporations  with  which  they  have  to  deal.  They  are  even 
inclined  to  think  that,  if  railway  discriminations  could  be  pre- 
vented, if  the  smaller  concern  could  be  put  upon  a level  with 
the  larger  one  in  buying  its  material  and  selling  its  products,  that 
the  progress  of  consolidation  would  at  least  proceed  with  much 
less  rapidity.  Those  who  read  the  testimony  presented,  therefore, 
must  use  judgment  and  compare  these  two  sides  of  the  story  in 
order  to  get  at  the  exact  truth.  Again,  those  interested  in  the 
consolidations  are  inclined  to  make  light  of  the  attractive  influ- 
ence of  monopoly,  while  the  outside  interests  are  apt  to  emphasize 
its  power.  In  this  connection  one  needs  to  remember  the  large 
place  given  to  the  possibility  of  a monopolistic  position  for  a con- 
solidated corporation  that  one  almost  invariably  finds  in  the  pros- 
pectus presented  to  the  independent  interests  when  urging  the 
desirability  of  combination.  The  inside  interests  again  empha- 
size the  possibilities  of  large  economy  in  production  sufficient  to 
pay  dividends  upon  the  common  stock  issued  as  a bonus,  without 
any  advance  in  prices.  The  testimony  on  the  whole  shows,  how- 
ever, that  in  most  cases  the  predicted  economies  have  not  been 
fully  attained  and  that  often  certain  expenses  incident  to  the 
management  of  business  upon  a large  scale  have  crept  in  which 


1902]  The  Industrial  Commission ; Trusts.  285 

partially  offset  the  economies  that  have  been  effected.  Upon  the 
basis  of  the  facts  disclosed,  as  summed  up  by  the  Commission,  the 
causes  of  combination  are,  first,  competition ; second,  economy  in 
production  and  distribution;  third,  the  hope  of  monopoly  power. 
The  first  and  third  of  these  forces,  the  former  compelling  consoli- 
dation, the  latter  drawing  business  interests  together,  are  perma- 
nently active.  The  second  certainly  will  be  at  work  until  the 
united  establishments  have  attained  that  size  which  will  give 
under  a given  condition  of  the  arts  and  experience  in  business 
management  the  maximum  economy.  With  the  increased  expe- 
rience in  dealing  with  great  business  interests,  there  seems  to 
be  no  possible  limit  to  their  size,  so  long  as  men  can  be  found  of 
sufficient  calibre  to  organize  and  manage  the  consolidated  corpo- 
rations. If  then  the  three  causes  named  above  are  the  only  ones 
answerable  for  the  great  combinations,  it  would  seem  that  the 
dream  of  the  socialists  might  after  a time  be  realized  through  the 
evolution  of  the  partnership  into  the  corporation,  of  the  corpora- 
tion into  the  corporation  of  corporations,  until  it  should  finally 
embrace  all  interests  which  might  in  any  way,  if  left  indepen- 
dent, compete  with  each  other. 

In  opposition  to  this  view,  there  are  many  witnesses  who  tes- 
tified to  the  power  of  other  forces.  It  will  be  admitted  that  what- 
ever contributes  to  the  growth  of  the  large  establishment,  caus- 
ing it  to  grow  faster  than  its  smaller  neighbor,  must  be  considered 
in  connection  with  the  causes  that  lead  to  the  formation  of  the 
modern  trusts.  It  is  affirmed  by  witnesses  that  the  policy  of  dis- 
crimination in  freight  rates,  giving  the  competitive  centers  lower 
rates  than  the  non-competitive  centers,  giving  the  business  man 
with  larger  resources  lower  rates  than  his  weaker  neighbor,  has 
contributed  in  many  cases  to  the  growth  of  certain  corporations 
and  to  the  destruction  of  others.  If  this  be  so,  and  its  truth  can 
hardly  be  questioned,  discriminations  by  the  railroads  must  cer- 
tainly be  placed  among  the  powerful,  though  less  permanent 
forces,  which  have  contributed  to  the  formation  of  the  great  con- 
solidations. It  is  also  a well  known  fact,  to  which  the  testimony 
in  the  Commission  bears  abundant  evidence,  that  once  a corpora- 
tion has  gained  a position  of  strategic  importance,  due,  it  may  be, 
to  favors  from  the  railroads,  operating  over  a considerable  terri- 


286 


Yale  Review . 


[Nov. 


tory,  it  may  adopt  a policy  of  cutting  prices  at  one  point  to  drive 
out  competition  there  while  raising  prices  temporarily  at  all 
others.  If  the  competition  at  the  given  point  proves  weak,  this 
policy  is  almost  invariably  successful;  even  if  competition  is 
strong,  it  is  often  successful  unless  competition  springs  up  at 
other  points.  If  competition  springs  up  at  other  points  this  pol- 
icy almost  invariably  proves  unsuccessful  and  the  consolidation 
in  this  case  must  make  use  of  large  economies  in  order  to  main- 
tain its  existence.  The  history  of  the  National  Asphalt  Com- 
pany, The  National  Cordage  Company,  and  the  National  Wall 
Paper  Company  proves  conclusively  that  where  economies  of 
production  are  not  for  any  reason  attained,  such  a policy  will 
usually  prove  unsuccessful  in  the  end.  The  profits  that  come 
from  a policy  of  discrimination  may  furnish  the  basis  of  a con- 
solidation, which  afterwards  may  be  maintained  by  establishing 
large  economies  in  production.  It  is  also  affirmed  that  the  desire 
to  take  advantage  of  the  laws  of  the  country,  especially  the 
protective  tariff  and  the  patent  system,  has  contributed  to  build 
up  consolidations.  These  influences  are  to  be  considered  in  con- 
nection with  the  desire  to  attain  a monopolistic  position.  What- 
ever may  give  a monopoly  will  always  prove  an  attractive  force 
in  drawing  conflicting  interests  together,  provided  that  after 
consolidation  they  are  reasonably  sure  of  attaining  the  fruits  of 
such  monopoly.  If  the  tariff  wall  or  the  possession  of  a patent 
right  will  give  a consolidation  the  exclusive  control  of  a certain 
line  of  commodities  within  the  United  States,  it  is  evident  that 
such  consolidation  will  be  able  to  maintain  prices  above  the  com- 
petitive level  of  the  world.  The  opportunity  for  a monopoly  will 
thus  be  present  within  the  industry,  and  will  always  hold  out  cer- 
tain inducements  to  the  interests  which  may  prove  powerful 
enough  to  bring  them  together.  To  this  fact,  the  witnesses 
before  the  Commission  gave  abundant  evidence. 

In  addition  to  these  causes  one  other  ought  to  be  mentioned 
which  is  perhaps  not  sufficiently  emphasized  in  the  report  of 
the  Commission.  This  factor  was  emphasized  by  President 
Hadley  in  an  article  on  the  “Formation  and  Control  of  Trusts,” 
published  in  Scribner’s  Monthly  for  November,  1899.  President 
Hadley  calls  attention  to  the  fact  that  the  formation  of  a large 


287 


1902]  The  Industrial  Commission  ; Trusts. 

company,  placing  its  shares  upon  the  market,  enables  its  owners 
to  sell  their  interests  to  better  advantage  than  they  were  able  to 
do  as  independent  interests.  There  seems  to  be  a psychological 
principle  operating  which  attracts  American  investors  toward 
the  big  concern;  mere  bigness  is  considered  to  be  a virtue,  and 
a small  share  in  a big  concern  is  more  highly  esteemed  than 
a large  share  in  a small  concern;  that  is,  the  investor  puts  a 
premium  upon  the  value  of  a large  enterprise  and  the  men  who 
have  been  most  active  in  the  formation  of  the  large  corporations 
have  discovered  this  principle  and  have  made  use  of  it  for  their 
own  profit.  Suppose  a corporation  is  formed  of  several  indepen- 
dent concerns  whose  combined  value  is  ten  million  dollars ; let  the 
promotor  capitalize  it  at  twenty  million  in  shares  of  one  hundred 
dollars  each  and  sell  it  out  to  the  public.  The  history  of  recent 
consolidation  shows,  in  general,  that  he  may  sell  the  entire  con- 
cern for  considerable  more  than  he  would  have  been  able  to  obtain 
if  he  had  capitalized  it  simply  at  its  real  value,  ten  million.  It 
is  doubtless  true  that  this  factor  is  not  a permanent  one,  and  with 
more  experience  with  the  great  corporation  it  will  gradually 
lose  its  force.  At  the  present  time,  however,  it  is  a factor  that 
must  not  be  neglected  in  the  summary  of  the  causes  at  work  pro- 
ducing the  great  corporate  consolidations. 

The  formation  of  consolidations  in  industry  has  often  been 
treated  as  an  isolated  phenomenon  in  the  economic  world.  This 
has  led  to  much  misapprehension.  The  forces  at  work  produc- 
ing the  industrial  consolidations  are  the  permanent  integrating 
forces  that  are  at  work  in  all  society.  These  forces  differ  some- 
what from  the  forces  at  work  in  the  political  world,  or  from 
those  at  work  in  the  distinctly  social  world.  They  differ,  how- 
ever, not  so  much  in  principle  as  in  the  specific  way  in  which 
they  operate.  The  consolidation  of  industry  must  be  considered 
as  a part  of  the  evolution  of  society.  Society  to-day  differs  from 
the  society  of  yesterday  chiefly  in  point  of  organization.  Perma- 
nent forces  are  at  work  in  all  lines  of  human  activity,  organiz- 
ing men’s  interests  into  higher  and  higher  forms.  This  is  seen 
in  the  progress  of  labor  unions,  in  the  organization  of  business 
associations,  in  the  organization  of  governments,  and  at  the  pres- 


Yale  Review. 


288 


[Nov. 


ent  time,  most  pronouncedly  in  the  higher  organizations  of  mod- 
ern business. 

III.  The  Form  of  Consolidated  Industries.  It  has  often 
been  stated  that  the  form  which  consolidated  industry  assumes 
is  of  small  account,  that  it  is  the  purpose  rather  than  the  form 
that  is  of  chief  interest.  It  is  entirely  true  that  form  is  of  less 
importance  than  the  character  and  working  of  the  consolidation. 
Still,  when  it  is  once  recognized  that  the  modern  trust  is  a bus- 
iness organization  and  that  in  each  organization  of  industry 
form  is  a factor  of  powerful  influence,  this  question  will  not  be 
lightly  passed  over.  It  is  certainly  true  that  the  form  under 
which  business  operations  are  conducted  determines  to  a large 
extent  the  economies  possible  and  to  a certain  degree  the  policy 
of  the  business.  The  partnership  has  certain  advantages,  the 
combination  of  interests  into  a pool  or  the  Kartel  certain  other 
advantages;  the  corporation  still  others.  The  form  which  the 
consolidation  assumes  determines,  to  a considerable  extent  at 
least,  the  question  of  whether  it  will  find  it  desirable  in  its  opera- 
tions to  aim  at  a low  cost  of  production  or  higher  prices  for  its 
products.  In  America,  consolidated  industry  has  finally  taken 
the  corporate  form;  the  same  is  true  in  England  and  to  a cer- 
tain extent  in  Germany  and  Austria.  In  general,  however,  the 
German  form  for  the  consolidation  of  industry  is  the  Kartel, 
or  the  industrial  combination  proper.  The  testimony,  and  espe- 
cially the  report,  of  Prof.  Jenks  on  the  European  trusts  shows 
that  there  is  a vast  difference  in  the  working  and  in  the  effect 
within  the  industry  itself  and  upon  industries  with  which  it  is 
brought  in  connection,  of  a trust  under  the  Kartel  form  from 
that  of  a trust  under  the  corporate  form.  The  great  corpora- 
tion is,  of  course,  a higher  form  of  organization  than  the  Kartel. 
It  harmonizes  the  entire  interests  of  the  industry  consolidated. 
Its  permanent  interests  are  always  dependent  upon  lowering  the 
cost  of  production  and  increasing  the  output.  It  thus  tends 
naturally  to  reduce  prices  in  order  to  increase  its  market.  The 
German  combination,  on  the  other  hand,  depends  largely  upon  its 
monopolistic  position  or  at  least  upon  a partial  monopoly  within 
its  field.  It  is  not  so  much  interested  from  the  economic  stand- 
point in  lowering  the  cost  of  production  as  in  lessening  the  out- 


1 902]  The  Industrial  Commission  ; Trusts.  289 

put  or  increasing  the  prices  of  its  goods.  The  question  of  form 
thus  becomes  a factor  of  the  first  importance  in  relation  to  the 
subject  of  international  trade.  The  value  of  the  corporation  as  a 
form  for  conducting  large  enterprises  is  emphasized  upon  almost 
every  page  of  the  testimony  and  especially  by  such  witnesses  as 
James  B.  Dill,  John  R.  Dos  Passos,  and  by  such  corporation 
leaders,  as  Schwab,  Flint,  Thurber,  Stetson,  Gary  and  others. 
The  form  which  consolidated  industry  assumes  is  not  only 
important  from  a political  standpoint,  it  is  of  large  importance 
from  the  standpoint  of  the  investor.  The  process  of  consolida- 
tion, the  formation  of  a huge  corporation  out  of  many  small 
ones,  gives  a large  opportunity  for  inside  manipulation  and  for 
the  operation  of  the  corporation  for  Wall  Street  purposes.  The 
question  of  capitalization  thus  becomes  one  of  public  importance 
since  it  is  likely  to  affect  the  policy  adopted  by  the  corporation 
itself.  The  witnesses  before  the  Commission  generally  agree 
that  the  inflated  capitalization  has  no  effect  whatever  on  the 
prices  of  the  goods  sold.  It  is  assumed  that  in  all  cases  the  cor- 
poration obtains  as  much  as  possible  for  its  services.  The 
increase  in  the  amount  of  capital  then  will  not  enable  the  corpo- 
ration to  demand  or  receive  higher  prices;  if  it  asks  higher 
prices  it  will  sell  less  goods;  and  if,  as  it  is  assumed,  it  was 
obtaining  the  maximum  revenue,  an  increase  in  price  means  a 
lessening  of  profits.  Still  there  is  evidence  in  the  report  of  the 
Commission  to  show  that  while  the  amount  of  the  capital  issued 
does  not  affect  its  ability  to  put  up  prices,  it  does  materially 
affect  the  policy  of  the  directors  in  the  conduct  of  its  business. 
The  amount  of  capital  then  is  an  important  factor  in  determining 
whether  the  corporation  shall  be  conducted  for  the  purposes  of 
economy  in  production  or  for  stock  speculation.  The  question 
of  watered  stock,  which  affects  primarily  the  corporation  in 
its  relation  to  the  investor,  thus  becomes  a question  in  which 
the  public  are  vitally  interested.  This  constitutes  the  economic 
basis  upon  which  legislation  may  be  asked  to  prevent  the  evils 
that  come  from  a flagrant  watering  of  stock.  The  form  of 
the  union,  too,  determines  the  process  of  formation;  that  is,  the 
promotion  and  underwriting  of  the  consolidation.  The  report 
of  the  Commission  shows  that  at  present  the  laws  of  the  States  in 


2go 


Yale  Review. 


[Nov. 


which  the  corporations  are  chiefly  formed,  are  singularly  defec- 
tive in  protecting  legitimate  business  interests  in  these  points. 
Corporations  are  necessary  for  the  permanent  development  of 
the  industries  of  the  country,  and  the  investors  in  these  corpora- 
tions ought  to  be  protected  as  a matter  of  public  policy,  so  that 
with  reasonable  care  on  their  part  their  investments  may  be 
attracted  into  those  lines  where  capital  is  most  needed;  that  is, 
where  the  social  demand  for  production  is  most  urgent.  If  the 
investors  are  not  protected,  it  means  simply  that  the  development 
of  the  industrial  resources  of  the  country  will  be  retarded,  and 
the  demand  not  satisfied,  unless  the  investors  are  able  to  protect 
themselves  until  public  policy  provides  sufficient  regulation  over 
the  formation  of  corporations  to  allow  investments  to  be  made 


th  reasonable  safety. 


IV.  The  Monopoly  Power  of  Combinations.  The  fourth 
question  in  the  solution  of  the  trust  problem  asks  whether  any 
of  the  great  corporations  have  a monopolistic  character,  and  if 
so,  upon  what  basis  this  monopoly  rests.  The  testimony 
upon  this  point  is  interesting  and  instructive,  if  not  conclusive. 
The  monopoly  power  of  a combination  is  shown  in  the  control  of 
prices,  of  wages,  and  of  the  rate  of  interest.  The  first  two  are 
of  more  importance  in  this  connection,  since  the  capitalist  is 
usually  combined  with  the  entrepreneur  in  the  formation  of  the 
consolidation.  Both  the  consumer  and  the  wage  earner  are  out- 
side. It  is  impossible  for  the  consolidations  to  form  a union 
with  the  consumers.  It  is  not  impossible  for  them  to  join  with 
the  wage  earners,  especially  where  the  wage  earners  are  united 
into  some  form  of  labor  organization.  The  study  of  the 
monopolistic  position  of  the  great  corporations  ought  to  investi- 
gate especially  the  question  of  the  relation  of  the  consolidations 
to  prices  and  wages.  Prof.  Jenks’s  study  of  prices  found  in  the 
first  volume  of  the  report  is  an  interesting  beginning  in  this  line. 
If  the  consolidations  are  able  to  raise  prices,  this  will  be  shown 
in  the  increase  of  the  margin  of  profit.  Prof.  Jenks’s  study  shows 
conclusively  that  for  a certain  length  of  time  at  least  the  greater 
corporations  have  been  able  to  increase  the  margin  of  profits. 
This  study  ought  to  be  extended  now  that  the  way  has  been 
pointed  out.  The  report  furnishes  a certain  amount  of  mate- 


291 


1902]  The  Industrial  Commission  ; Trusts. 

rial  upon  which  a study  could  be  based,  and  in  addition  material 
will  be  found  in  the  Bulletin  of  the  Department  of  Labor  for 
July,  1900,  in  the  report  of  the  Senate  Committee  on  Prices  and 
Wages,  and  in  the  Bulletin  of  the  Department  of  Labor  for 
March,  1902,  on  the  course  of  wholesale  prices  from  1890  to 
1901.  It  is  possible  to  determine  from  a study  of  the  available 
data  certain  facts  with  regard  to  the  control  of  prices  by  the 
consolidations,  that  are  now  mere  opinion.  The  chief  defect  of 
the  report  of  the  Commission  is  that  it  often  deals  with  opinions 
when  it  might  have  given  us  facts.  Possibly  this  defect  is  inci- 
dent to  the  method  of  the  investigation,  the  examination  of  wit- 
nesses from  all  callings  in  life;  still  it  will  generally  be  admitted 
that  the  Commission  might  have  given  the  public  more  of  the 
kind  of  work  that  is  included  in  Jenks’s  study  of  prices.  To  illus- 
trate: the  report  of  the  Commission  devotes  a very  large  space, 
both  in  the  testimony  and  in  its  final  report,  to  the  relation  of 
the  tariff  and  the  trusts.  The  question  of  the  tariff  has  been  made 
so  much  a political  one  that  the  investigation  is  less  valuable.  It 
is  everywhere  evident  that  party  interests  are  attempting  to  jus- 
tify party  policy  or  make  political  capital  out  of  the  inter-relation 
of  the  trusts  to  the  tariffs.  It  is  stated,  for  instance,  that  the 
tariff  “is  the  mother  of  trusts,”  that  the  tariff  is  responsible  to  a 
large  extent  for  the  existence  of  the  trusts  in  the  United  States. 
In  answer  to  this  charge  attention  is  called  to  the  fact  that  trusts 
exist  in  England.  Therefore,  the  conclusion  is  that  the  tariff  is 
not  responsible  for  the  trusts.  This  is  nothing  more  nor  less 
than  an  attempt  to  throw  dust  into  the  eyes  of  the  public.  The 
whole  question  is  not,  does  the  existence  of  the  protective  tariff 
favor  the  formation  of  trusts,  but  rather,  under  the  protective 
regime  are  the  trusts,  after  their  formation,  able  to  increase  the 
margin  of  profit,  to  raise  the  level  of  prices  above  the  competitive 
level?  This  is  the  question  at  issue  and  one  which  cannot  be 
answered  by  the  expression  of  opinion  but  by  a study  of  facts. 
How  do  the  prices  of  trust-made  goods  in  England  compare  with 
prices  in  other  countries?  How  do  the  prices  of  trust-made 
goods  in  the  United  States  compare  with  the  same  trust-made 
goods  in  England  or  in  Germany?  These  questions  are  capable 
of  solution  by  statistical  methods.  For  example,  it  would  be  pos- 


292 


Yale  Review . 


[Nov. 


sible  to  study  the  operations  of  the  Steel  Trust,  as,  for  example, 
M.  Yves  Guyot  has  done,  in  a paper  in  the  Journal  des  Econo- 
mistes , and  show  within  reasonable  limits  what  proportion  of 
the  profits  of  the  corporation  is  due  to  the  fact  that  it  oper- 
ates within  the  protection  of  the  tariff  wall.  On  the  other  hand, 
certain  industries  in  this  country  have  no  protection  whatever. 
Here  home  and  foreign  competition  tend  to  keep  prices  at  the 
competitive  level.  In  the  establishment  of  the  protective  system 
it  was  assumed  that  while  foreign  competition  would  be 
removed  to  a certain  extent,  domestic  competition  would 
still  be  present  to  keep  the  price  of  the  goods  near  the  domes- 
tic cost  of  production.  The  formation  of  trusts  within  the 
protected  industries  has  changed  the  conditions  and  enables  a 
protected  trust  to  permanently  keep  the  prices  for  its  goods  in  the 
home  market  at  a level  with  the  prices  at  which  goods  can  be 
imported.  Thus  reduction  of  the  cost  of  production  increases 
the  profits  of  the  trusts.  With  increasing  prices  comes  increased 
competition;  with  increasing  competition  among  the  investors 
within  this  line,  further  consolidation,  increased  cost  of  produc- 
tion, and  permanently  higher  prices.  With  the  ability  to  main- 
tain higher  prices  at  home  the  temptation  is  strong  to  sell  the 
surplus  product  in  the  foreign  market  at  low  prices  in  order  to 
keep  up  the  prices  at  home.  This  means  that  the  protective  tariff, 
which  was  originally  adopted  to  encourage  the  growth  of  domes- 
tic manufactures,  has  become,  under  changed  industrial  condi- 
tions, the  means  by  which  consolidated  industries  are  able  to 
deflect  a certain  proportion  of  the  social  product  from  other  lines 
into  their  own  treasury.  The  report  of  the  Industrial  Commis- 
sion furnishes  a large  amount  of  evidence  to  substantiate  these 
views. 

The  testimony  also  shows  that  the  monopolistic  position  of  the 
great  corporations  have  been  aided  by  railway  discriminations, 
by  the  use  of  the  factor  system  and  by  the  policy  of  destructive 
competition  at  certain  points  in  order  that  the  great  companies 
might  be  freed  from  the  annoyance  of  local  competition.  All 
these  systems  have  been  used  to  build  up  and  maintain  monopoly 
prices. 


293 


1902]  The  Industrial  Commission  ; Trusts . 

The  influence  of  the  factor. system  has  undoubtedly  been  too 
much  emphasized.  The  testimony  before  the  Commission  shows 
that  while  the  factor  system  may  aid  the  trusts  in  maintaining 
prices  slightly  above  the  competitive  level,  it  is  very  seldom  able 
to  secure  a permanent  increase  in  price.  Nevertheless,  its  use 
may  supplement  the  great  forces  that  have  been  called  in  to  aid 
the  great  consolidations  in  their  attempt  to  gain  supremacy 
within  their  own  domain. 

In  every  line  of  industry  one  fact  of  utmost  importance  stands 
out  clear  and  bold,  that  is,  the  vitality  of  competition.  In  the 
sugar  industry,  in  the  iron  and  steel  industry,  in  the  tobacco 
industry,  in  the  rope  and  twine  industry,  in  the  asphalt  industry, 
in  fact  everwhere,  competition,  notwithstanding  consolidation,  is 
a factor  that  the  modern  business  man  may  neglect  only  at  his 
peril.  The  rapidity  with  which  capital  has  been  accumulated 
within  the  last  few  years,  the  abundance  of  talent  in  the  admin- 
istrative work  of  the  corporation,  make  it  impossible  to  crush 
competition  except  by  depending  upon  the  lowest  cost  of  pro- 
duction. Railway  discriminations  may  favor  consolidation, 
the  tariff  and  patent  monopolies  may  contribute  to  their 
support;  still  wherever,  for  any  length  of  time,  any  one  of 
the  corporations  has  attempted  to  maintain  prices  above  the 
competitive  level,  the  inevitable  result  has  been  the  attrac- 
tion of  new  capital  and  brains.  The  modern  corporations, 
therefore,  have  gradually  been  forced  to  realize  that  safety 
lies  only  in  securing  the  lowest  cost  of  production  and  main- 
taining prices  at  a level  which  will  not  attract  new  capital 
into  the  industry.  The  sugar  trust  has  found  this  in  the  compe- 
tition with  the  Arbuckles.  The  steel  corporation  meets  compe- 
tition at  every  point,  and  even  the  Standard  Oil  Company  has  a 
powerful  competitor.  The  course  of  events  seems  to  be  every- 
where the  same.  The  trusts  when  formed  usually  consolidate 
about  90  per  cent,  of  a given  industry.  Under  these  conditions 
it  is  not  difficult  to  keep  up  prices  for  a time. 

The  high  rate  of  prices  attracts  new  capital ; soon  the 
trust  controls  not  90  per  cent,  but  70  per  cent,  or  even  60  per 
cent,  or  less  of  the  production.  The  facts  showing  the  devel- 
opment of  new  competition  side  by  side  with  the  great  consolida- 


294 


Yale  Review . 


[Nov. 


tions,  are  perhaps  the  most  important  ones  that  the  report  of  the 
Industrial  Commission  has  given  the  world.  These  facts  ought 
to  be  recognized  both  by  the  consolidations  and  by  the  legisla- 
tors; by  the  consolidations,  since  their  existence  depends  upon 
observing  the  course  of  events  in  this  particular;  by  the  legisla- 
tors, since  laws  are  unnecessary  to  protect  the  public  so  long  as 
the  competitive  forces  are  able  to  work. 

Upon  the  subject  of  wages,  there  is  a large  amount  of  testi- 
mony, the  most  of  which  is  of  small  value.  It  is  generally  shown 
that  the  consolidations  have  not  reduced  the  wages  of  labor.  It 
is  not  shown,  however,  what  is  the  effect  of  consolidations  on 
the  growth  of  labor  unions  and  the  consequent  ability  of  labor 
unions  to  protect  themselves.  There  is  a certain  amount  of  evi- 
dence at  least  to  show  that  so  far  the  tendency  has  been  to  unite 
the  forces  of  the  consolidations  with  those  of  the  labor  unions  to 
secure  higher  wages  for  the  members  of  the  union  and  somewhat 
higher  prices  for  the  products.  This  simply  means  that  the 
added  profits  have  been  maintained  with  the  aid  of  the  laborers 
employed,  at  the  expense  of  the  public  and  the  outside  laborers. 
If  this  be  the  fact,  it  is  evident  that  the  union  of  the  trusts  with 
the  labor  unions  constitutes  one  of  the  most  dangerous  features 
in  connection  with  the  consolidation  of  industry. 

V.  The  Public  Control  of  Consolidations.  This  subject, 
which  ought  to  be  considered  only  after  a full  investigation  of  the 
four  preceding  ones,  is  treated  by  the  Commission  with  considera- 
ble fullness.  John  R.  Dos  Passos  and  Charles  C.  Allen  testified 
at  length  on  this  subject.  Prof.  Huff  cut  treats  the  subject  in  its 
legal  aspects,  and  it  is  considered  in  the  final  report  by  both  Pro- 
fessors Jenks  and  Mr.  Stimson,  the  legal  representative  of  the 
Commission.  Much  attention  is  also  given  this  subject  in  the 
examination  of  witnesses.  The  general  source  of  information 
upon  this  topic  is  furnished  by  volumes  two  and  eighteen.  Vol- 
ume two  gives  the  anti-trust  legislation  both  of  the  United  States 
and  of  the  States  and  the  decisions  of  the  courts,  together  with  a 
summary  of  the  corporation  law  of  the  various  States  in  the 
United  States.  The  report  of  Profesor  Jenks  in  volume  eigh- 
teen gives  the  laws  relating  to  corporations  in  foreign  countries, 
especially  England,  Germany  and  Austria.  Prof.  Jenks’s  report 


295 


1902]  The  Industrial  Commission  ; Trusts. 

is  especially  valuable,  showing,  as  it  does,  the  effectiveness  of 
foreign  legislation  in  checking  the  growth  of  speculative  corpo- 
rations, limiting  their  power,  and  directing  their  activities  within 
legitimate  channels.  The  examination  of  the  witnesses  who  tes- 
tified in  regard  to  the  corporation  law  of  New  Jersey,  Dela- 
ware and  West  Virginia,  shows  the  weakness  of  our  present  cor- 
poration law  under  changed  economic  conditions.  The  present 
law  was  formulated  and  enacted  for  the  government  of  small 
corporations,  working  under  the  laws  of  competition.  These 
laws  are  entirely  inadequate  to  govern  the  large  corporations, 
some  of  which  have  a certain  degree  of  monopolistic  power. 
This  investigation  of  State  corporation  law  calls  attention  to 
two  aspects  of  the  problem  that  ought  not  to  be  neglected. 
First,  the  control  of  the  corporations  by  means  of  improving  the 
statute  laws  of  the  various  States,  and,  second,  the  control  of 
corporations  through  a federal  corporation  law.  The  testimony 
regarding  the  corporation  law  of  those  States  in  which  the  great 
corporations  are  chiefly  formed  shows  how  inadequate  are  the 
present  laws  to  control  corporations  whose  business  is  world-wide. 
Both  the  public  and  the  law  makers  are  beginning  to  see  the 
folly  of  granting  charters  with  no  restrictions  upon  the  opera- 
tions of  the  giant  corporations  and  afterwards  filling  the  statute- 
books  with  drastic  laws  attempting  to  curb  the  creatures  which 
have  grown  strong  on  the  favors  given  them.  If  the  report 
of  the  Commission  should  have  no  other  effect  save  that  of  call- 
ing attention  to  the  absolute  necessity  of  revising  the  corporation 
laws  to  fit  the  changed  economic  conditions,  it  would  be  justified 
in  its  existence.  The  investigation  of  the  Industrial  Commission 
directs  attention  to  the  desirability  of  changes  in  the  State  laws 
or  to  the  adoption  of  a Federal  corporation  law.  The  difficulties 
of  the  latter  step  are  fully  discussed  by  Prof.  Huffcut  in  his 
paper  “ on  the  constitutional  aspects  of  the  federal  control  of  cor- 
porations.” Its  advantages  and  disadvantages  are  considered  by 
such  attorneys  as  James  B.  Dill  and  John  R.  Dos  Passos.  The 
Commission  itself  recommended  a Federal  corporation  law,  only 
in  case  Federal  supervision  and  taxation  proved  inadequate,  “to 
properly  control  the  great  corporations  and  combinations.” 
Such  action,  involving,  as  it  would,  radical  changes  in  the 


296 


Yale  Review. 


[Nov. 


government  and  the  courts,  it  hopes  may  be  avoided  by  Federal 
supervision  and  taxation.  To  accomplish  this  it  is  proposed  to 
establish  a bureau  of  the  Treasury  Department,  to  register  all  cor- 
porations engaged  in  interstate  commerce,  to  secure  the  reports 
necessary  to  tax  their  franchises,  to  inspect  their  books,  to  see 
that  their  accounts  are  properly  kept,  and  to  collate  and  publish 
information  in  regard  to  their  operations  for  the  use  of  Congress. 
It  is  thought  by  the  Commission  that  such  provision  “will  be 
sufficient  to  remove  most  of  the  abuses  which  have  arisen  in  con- 
nection with  the  industrial  combinations.”  In  addition  to  this 
recommendation  and  to  those  formulated  in  the  preliminary 
report,  the  Commission  further  recommends,  ( 1 ) that  the  anti- 
trust laws  be  strictly  enforced;  (2)  that  the  policy  of  making 
local  cuts  in  prices  and  discriminations  to  individuals  be  made  a 
penal  and  criminal  offence;  (3)  that  provisions  similar  to  the 
anti-stock-watering  laws  of  Massachusetts  be  enacted  and 
enforced.  On  the  whole,  the  recommendations  of  the  Commis- 
sion are  less  radical  than  might  have  been  expected.  It  is 
improbable,  however,  that  the  program  proposed  will  be  adopted 
by  Congress.  The  chief  value  of  the  recommendations  consist 
not  in  themselves,  but  in  their  effect  upon  the  public  mind  and 
upon  future  legislation.  It  may  reasonably  be  expected  that 
Congress,  at  the  coming  session,  will,  upon  full  consideration 
of  the  report,  provide  legislation  that,  while  not  interfering  with 
any  legitimate  business  interests,  will  safeguard  to  a sufficient 
extent  the  interests  both  of  the  investor  and  the  public. 

Maurice  H.  Robinson. 


The  University  of  Illinois. 


